Note: This table reports the results of the effect of climate exposure on high leverage costs in states with Democratic or Republican affiliation. Models 1 and 2 report regression results for the subsample with firms headquartered in blue states; Models 3 and 4 report regression results for the subsample with firms headquartered in red states. We classify a state as blue if it voted Democratic and red if it voted Republican in the last presidential election. The dependent variable is industry-adjusted sales growth (SALES_G). The main variable of interest is the interaction term between industry-adjusted climate change exposure (CCEXPO) and a dummy variable that equals 1 if, in that year, the firm’s long-term debt-to-assets ratio ranks in the top three deciles of the overall sample (HLEV). Additional variable definitions are in the Appendix. All control variables are adjusted to their industry-year means and are winsorized at the 1st and 99th percentiles. Further, we require that each industry-year contains at least four firms to be qualified in the analysis so that the industry-year mean is not biased toward outliers. The sample period is 2004—2020. The t-statistics based on heteroskedasticity-robust standard errors and clustered at the firm level are reported in parentheses. Asterisks denote statistical significance at the 1% (***), 5% (**), or 10% (*) level.